In the last few weeks, I’ve had three different friends come to me with a good problem to have: They have piles of money, but they have no idea what to do with that money. They didn’t really want my advice so much as to brainstorm ideas and talk about options.
These conversations got me thinking, though. What has my money done for me lately? When you think about money as a tool, an as a means to an end, it doesn’t make sense to let it sit idle. Instead, you want to put that money to work for you so that you can enjoy life.
Invest that Money
It’s one thing to have a couple thousand dollars in an emergency fund. It’s quite another to let a few thousand dollars (or even more) sit in a low-yield bank account that doesn’t serve much of a purpose.
Depending on how much money you have, your risk tolerance, and other factors, you can consider various investments.
Do you have enough money to buy an investment property? You could flip a house, or buy a multi-family complex and rent out the units. Perhaps you don’t have a ton of money to invest, but you could buy some dividend stocks and start building your income portfolio. Other investments might include buying a business, purchasing a web site and monetizing it, or lending money to someone else for the interest earnings. There are a number of interesting options for the investor who is willing to do a little homework.
Putting the money to work for you can provide you with a way encourage your money to make money, offering you long-term returns and income that can boost your wealth and improve your level of financial freedom.
What About Life Experiences?
Of course, not all investments have to be financial. While I like to make sure that I am investing for the long term, I also like my money to provide me with worthwhile experiences right now. I enjoy travel, and I like my money to be put to work providing me with interesting experiences that enrich my life.
I also find that putting my money to work for extracurricular activities for my son, and for cultural experiences like plays and concerts, are investments in my lifestyle. The money might be gone, but my family’s lifestyle is improved. There’s a lot to be said for having your money work toward your enjoyment of life. What good is it if you never get around to enjoying it?
It can also make sense to invest in your community or a cause that you believe in. If you think that your money can make a difference through a charity, that can be considered an investment in society. The return is a society that you are happy to live in, and the benefits of progress as a civilization. If those are your priorities, putting your money in places that you feel can make that happen can make sense.
Are You Ready for Opportunities?
This doesn’t mean that all your capital should be tied up all the time. One of my friends has a substantial chunk just sitting there. He says he likes to have it available to take advantage of opportunities, but the reality is that it’s such a huge amount of money that he could conceivably take advantage of a number of opportunities.
It’s good that he has thought about this, though. Part of financial freedom, and the development of long-term wealth, is the ability to recognize opportunities, and be prepared to act on them. It does you no good to identify a rental property that available for a good deal if you don’t have the credit score and the down payment available to move on it.
Likewise, you can’t take advantage of an IPO or get in on a promising startup if you don’t have the resources to make it happen. While you want to make sure your money is working for you, it is important not to create a liquidity problem. You need to find that balance between having the ability to seize opportunities while still having money working for you.